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Chapter 1: What is the main topic discussed in this episode?
a listener production.
ASX to fall as oil rips. The US Federal Reserve keeps interest rates on hold while investors await big tech results. Hello, good morning. I'm James Gruber. It's Thursday, the 30th of April, and this is the morning edition of the ComSec Market Update.
Chapter 2: What are the implications of rising oil prices on the ASX?
Well, oil is back in the spotlight after prices surged overnight as hopes for a near-term resolution to the standoff in the Strait of Hormuz faded. That again fuelled concerns about inflation, which impacted stocks and bonds in both the US and Europe.
Meanwhile, the US Federal Reserve kept interest rates on hold, as expected, at the conclusion of what's likely to be the last monetary policy meeting under Chair Jerome Powell. Investors are also eagerly awaiting results from five of the mega-cap tech companies in the US over the next 24 hours or so.
Chapter 3: How did the US Federal Reserve's decision impact the market?
As we go to air, those mega-cap tech company results are coming out. Microsoft revenue beat guidance, yet its shares are relatively flat in after-hours trading, while Meta increased its investment spend on AI and that's sent its shares tumbling after-hours down around 6% as we speak. Let's take a deeper look at what's happened with Aussie futures, commodities and currencies now.
The ASX is poised to open lower with index futures down 0.6%. Speaking of the ASX 200, yesterday it ended down 0.3% at $8,687, the lowest close in almost a month. The The benchmark has lost nearly 3% over the past seven consecutive sessions, marking its longest losing streak since mid-June 2022. Despite yesterday's data showing softer-than-expected headline inflation,
Inflation for March rose 4.6% year-on-year, below market expectations for a 4.8% rise, but the trimmed mean inflation number increased 3.5% year-on-year for the March quarter, in line with consensus estimates. Markets are now factoring in a 74% chance of a 25 basis point rate hike from the RBA next week, down from 84% prior to the inflation data.
Turning to commodity markets, on those oil prices, they rose to the highest in nearly a month as deadlocked US-Iran negotiations made investors more concerned about prolonged disruptions to Middle Eastern supply. US government data showed a bigger weekly draw in crude inventories than expected, which also put upward pressure on oil prices.
Brent crude futures settled 6% high, just above US$118 a barrel. Base metal prices were lower on Wednesday as fears over global economic growth returned due to rising oil prices. Copper futures were down 0.7%, while aluminium futures were 1.6% lower. Gold futures fell to a one-month low as investors remained concerned about inflation stemming from the war.
The futures settled down 1% to US$4,561 an ounce. Iron ore futures, meanwhile, were steady at 107.15 US dollars a ton. Let's take a look at currencies. They were lower against the US dollar. The euro dipped 0.3% to 1.1675 US dollars. The Japanese yen dropped 0.5% to 160.37 yen. And the Aussie dollar slumped 0.9% to 71.15 US cents. Let's head to Wall Street.
The Dow Jones index finished down 0.6%, while both the S&P 500 and Nasdaq were flat. A closer look at the trading day there. Wall Street moved lower on Wednesday, mostly with spiking crude prices fanning inflation worries as the Federal Reserve left interest rates unchanged. Among the 11 major sectors of the S&P 500, energy stocks benefiting from the jump in crude prices led the gainers.
Materials and utilities were down the most. Robinhood markets fell 13% after the online brokerage missed first quarter profit expectations. Shares of data storage companies climbed following an upbeat fourth quarter forecast from Seagate Technology. Seagate jumped 10%, while Peers, SanDisk and Western Digital gained between 6.3% and 5.7% respectively.
Starbucks advanced 8% after raising its annual profit forecast. Meanwhile, Visa jumped 8% also after the payments processing company raised its forecast for full-year earnings. U.S. government bond yields rose due to the escalating oil prices stoking those inflation concerns. The U.S. 10-year Treasury yield climbed 6 points to 4.41%, while the U.S. 2-year Treasury yield was up 9 points to 3.93%.
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Chapter 4: What are the expectations for Big Tech earnings reports?
Their declines dragged the healthcare index down 1.7%. UBS gained 3.2% after the Swiss bank posted better than expected first quarter net profit. Adidas jumped 8.4% after the German sportswear group reported better than expected first quarter operating profit. It's now time for the watch list. In Australia, there's an update from Domino's Pizza today.
Meanwhile, private sector credit growth is also released. In the US, first quarter earning season is in full swing. As we speak, those results are coming in from Meta, Amazon, Alphabet and Microsoft. For a full update on these, check out our morning report video later this morning.
Company results tomorrow morning our time include Apple, Eli Lilly, Mastercard, Caterpillar, Merck, Amgen, ConocoPhillips, SanDisk and Bristol-Meyer. There are also advanced GDP figures for the March quarter for the US with 1.2% quarter on quarter expected. In Europe, the ECB will hand out its decision on interest rates which are tipped to remain at 2.15%.
And now it's time for our one more thing segment. One of the curious things about U.S. corporate earnings is that we've hardly seen a company miss or forecast downgrade due to higher oil prices and the impact of the Iran war. That stands in stark contrast to Australia, where many companies have been downgrading their earnings guidance, citing fallout from the conflict.
The question is, why the stark contrast between here and the U.S. ? It may be because the US has gone from being a large importer of oil to now being a large exporter. That makes it less susceptible to higher oil prices and oil crises than it has been in the past.
Australia, being a large importer of oil, remains highly sensitive to the spikes in oil prices that we've seen over the past few months. And that's it for today. The ComSec Media and Markets team is monitoring developments on today's local trading session, so check out our afternoon episode of the podcast for all the key updates. I'm James Gruber. Have a great day.
This podcast is prepared, approved and distributed in Australia by Commonwealth Securities Limited, ABN 60067254399, AFSL 238814. The information does not take into consideration your objectives, financial situation or needs. Consider the appropriateness of the information before acting and if necessary, seek appropriate professional advice.
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